-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vj3ZIxDBnh41FfMZPfhApmHgqF7JzG4cx8Kw5SNP41ddZn/FhzXiPBZnZ7IhXH+N JHiKF3TciZOvPkOM8xRd6Q== 0000950115-95-000411.txt : 19951120 0000950115-95-000411.hdr.sgml : 19951120 ACCESSION NUMBER: 0000950115-95-000411 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951115 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADAGE INC CENTRAL INDEX KEY: 0000002186 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC & OTHER ELECTRICAL EQUIPMENT (NO COMPUTER EQUIP) [3600] IRS NUMBER: 042225121 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-07336 FILM NUMBER: 95593573 BUSINESS ADDRESS: STREET 1: 625 WILLOWBROOK LANE CITY: WEST CHESTER STATE: PA ZIP: 19382 BUSINESS PHONE: 2154303900 MAIL ADDRESS: STREET 1: 625 WILLOWBROOK LANE STREET 2: 625 WILLOWBROOK LANE CITY: WEST CHESTER STATE: PA ZIP: 19382 10-Q 1 QUARTERLY REPORT FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended September 30, 1995 Commission file number 33-31797 ADAGE, INC. (Exchange name of registrant as specified in its charter) Pennsylvania 04-2225121 (State or other jurisdiction of I.R.S. Employer Identification Incorporation or organization) Number 400 Willowbrook Lane, West Chester, PA 19382 (Address of principal executive officers) (Zip Codes) (215) 430-3900 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date of October 31, 1995 5,121,538 shares of Common Stock, par value $.60 per share. PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS ADAGE, INC. Condensed Consolidated Balance Sheets
September 30, 1995 DECEMBER 31, 1994 ------------------ ---------------- (Unaudited) (Unaudited) ASSETS 000's Omitted ------------- Current Assets Cash $ - $ 184 Accounts receivable, net 10,895 16,354 Inventories 21,760 29,425 Marketable securities 177 175 Other current assets 2,336 1,885 -------- -------- Total Current Assets 35,168 48,023 Property, plant and equipment, net 13,179 21,136 Investments and long-term receivable 758 941 Net assets of discontinued segments 5,545 5,983 Intangible and other assets 3,008 2,829 -------- -------- Total Assets $ 57,658 $ 78,912 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Current maturities of long-term debt $ 2,678 $ 3,034 Accounts payable 7,223 13,735 Accrued expenses 3,794 6,750 Income taxes payable 209 - -------- -------- Total Current Liabilities 13,904 23,519 Long-term debt 11,044 22,891 Minority interest in subsidiaries - 1,266 Stockholders' equity 32,710 31,236 -------- ------- $ 57,658 $78,912 ======== =======
Note 1. The consolidated balance sheet at December 31, 1994 has been condensed from the audited financial statements. See Notes to condensed consolidated financial statements. 2 ITEM 1 - FINANCIAL STATEMENTS - continued ADAGE, INC. Condensed Consolidated Statements of Income
FOR THE THREE MONTHS ENDED -------------------------- SEPTEMBER 30, 1995 1994 ---- ---- (Unaudited) (Unaudited) 000's Omitted ------------- Income Sales $ 19,257 $ 20,280 Investment income 2 48 Other 125 (36) -------- -------- 19,384 20,292 Costs and Expenses Cost of sales 16,247 15,699 Selling, general & administrative 3,985 4,044 Interest 230 239 -------- -------- 20,462 19,982 Income (loss) from continuing operations before income taxes (1,078) 310 Provision for income taxes (benefit) (347) 108 -------- -------- Net income (Loss) from continuing operations $ (731) $ 202 Income from discontinued operations net of taxes 189 116 Gain on sale of discontinued operations net of taxes 1,409 - -------- -------- Net income $ 867 $ 318 ======== ======== Earnings Per Common Share Continuing operations $ (.14) $ .04 Discontinued operations .04 .02 Sale of discontinued operations .27 - -------- -------- Net Income $ .17 $ .06 ======== ======== Weighted Average Common Shares Outstanding 5,105,440 5,088,595 ========= =========
3 ITEM 1 - FINANCIAL STATEMENTS - continued ADAGE, INC. Condensed Consolidated Statements of Income
FOR THE NINE MONTHS ENDED ------------------------- SEPTEMBER 30, 1995 1994 ---- ---- (Unaudited) (Unaudited) 000's Omitted ------------- Income Sales $ 62,130 $ 60,651 Investment income 196 65 Other 336 122 -------- ------- 62,662 60,838 Costs and Expenses Cost of sales 50,952 46,637 Selling, general and administrative 12,633 13,347 Interest 640 537 -------- -------- 64,225 60,521 Income (loss) from continuing operations before income taxes (1,563) 317 Provision for income taxes (benefit) (531) 114 -------- -------- Net income (loss) from continuing operations (1,032) 203 Income from discontinued operations net of applicable taxes 1,014 238 Gain on sale of discontinued operations 1,409 - -------- -------- Net income $ 1,391 $ 441 ======== ======== Earnings Per Common Share Continuing operations $ (.20) $ .04 Discontinued operations .20 .05 Gain on sale of discontinued operations . 28 . - -------- -------- Net Income $ .28 $ .09 ======== ======== Weighted Average Common Share Outstanding 5,100,875 5,092,595 ========= =========
See Notes to Condensed Consolidated Financial Statements. 4 ITEM 1 - FINANCIAL STATEMENTS - continued ADAGE, INC. Condensed Consolidated Statements of Cash Flows
FOR THE NINE MONTHS ENDED ------------------------- SEPTEMBER 30, 1995 1994 ---- ----- (Unaudited) (Unaudited) 000's Omitted -------------- Operating activities: Net income $ 1,391 $ 524 Adjustments to reconcile net income to cash flows Depreciation and amortization 1,968 1,379 (Gain) Loss on sale of marketable securities (187) (35) Decrease (increase) in current assets Accounts receivable, net 1,335 (167) Inventory (1,608) (1,149) Other current assets (671) 103 Increase (decrease) in current liabilities Accounts payable (2,320) (301) Other current liabilities (206) 153 Discontinued segment-noncash charges and working capital changes 678 1,306 Gain on sale of discontinued operations (1,409) - ------- -------- Cash (used) provided from operations (1,029) 1,813 Investing activities: Property, plant and equipment Purchases (588) (848) Long-term investments and receivables Sales 184 - Investing activities of discontinued segment (193) (441) Sales of discontinued operations 6,804 Other items (14) (20) ------- -------- Cash (used) provided by investing activities 6,193 (1,309) Financing activities: Long-term debt Additions 345 361 Payments (3,511) (1,429) Changes in lines of credit (2,293) 976 Financing activities of discontinued segment 111 (134) -------- -------- Cash (used) by financing activities (5,348) (226) -------- -------- Increase in cash (184) 278 Cash at beginning of period 184 184 -------- -------- Cash at end of period $ - $ 462 ======== ========
See Notes to Condensed Consolidated Financial Statements 5 Notes to Condensed Consolidated Financial Statements (Unaudited) (000's Omitted) 1. Condensed Consolidated Financial Statements The condensed consolidated balance sheet as of September 30, 1995, the consolidated statements of operations and the consolidated statements of cash flows for the three months ended September 30, 1995 and 1994 have been prepared by the Company, without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in cash flows at September 30, 1995 and for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1994 Annual Report to Shareholders. The results of operations for the period ended September 30, 1995 are not necessarily indicative of the operating results for a full year. 2. Inventories
September 30, December 31, 1995 1994 ---- ---- Inventories consisted of: Raw Material $ 11,802 $ 18,375 Work in Process 2,501 2,447 Finished goods 7,457 8,603 -------- --------- $ 21,760 $ 29,425 ======== =========
The excess of current cost over LIFO inventory value at December 31, 1994 is: $452.
September 30, December 31, 1995 1994 ---- ---- Inventories valued at FIFO $ 21,760 $ 20,152 Inventories valued at LIFO - 9,273 -------- -------- $ 21,760 $ 29,425 ======== ========
6 3. Stockholder's Equity Stockholder's Equity is comprised of the following:
September 30, December 31, 1995 1994 ---- ----- Common Stock $ 3,073 $ 3,059 Additional Capital 20,325 20,349 Retained Earnings 9,943 8,553 Net unrealized loss on marketable securities (631) (725) -------- -------- $ 32,710 $ 31,236 ======== ========
4. Sale of Niagara Cold Drawn Corporation On August 16, 1995 the Company sold its 80% interest in the stock of Niagara Cold Drawn Corporation to International Metals Acquisition Corporation for $6.8 million in cash. Niagara Cold Drawn Corporation net assets at the date of sale were as follows: Current Assets $ 17,909 Property, Plant and Equipment, net 6,214 Other Assets 631 --------- Total Assets 24,754 Current Liabilities 11,146 Long-term Debt 7,087 --------- Net Assets $ 6,521 =========
7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS Results of Operations As an aid to understanding the Company's operating results, the following table shows each item from the consolidated statement of income expressed as a percentage of net sales:
Percentage of Net Sales Quarter Ended Nine Month Ended Year Ended September 30, September 30, December 31, 1995 1994 1995 1994 1994 ---- ---- ---- ---- ---- Sales 100.0% 100.0% 100.0% 100.0% 100.0% Cost of sales 84.4% 77.4% 82.0% 76.9% 75.4% Selling, general administrative 20.6% 19.9% 20.3% 22.0% 22.9% Interest expense 1.2% 1.2% 1.0% 0.9% 0.8% Net Income from continuing operations (3.8%) 1.0% (1.7%) 0.3% 0.6%
Net Sales Net sales for the three months and nine months ended September 30, 1995 increased (decreased) compared to sales for the same period in 1994. This change is made up of the following:
Increase (Decrease) ------------------- Three Months Ended Nine Months Ended September 30, September 30, 1995 1994 ---- ---- Paper Manufacturing $ 191 $ 3,480 Specialty Manufacturing (218) 48 Wireless Communications Equipment (2,114) (2,867)
Sales in the wireless communications equipment business segment decreased due to parts shortage which constrained production of certain products. Increases in the paper manufacturing segment were due to price increases. Cost of Sales Cost of sales as a percentage of net sales increased 7.0% to 84.4% for the quarter ended September 30, 1995 from 77.4% for the quarter ended September 30, 1994 and increased 5.1% to 82.0% for the nine months ended September 30, 1995 compared to 76.9% for the nine months ended September 30, 1994. Detail of these changes by segment follows:
Quarter Ended Nine Months Ended September 30, September 30, 1995 1994 1995 1994 ---- ---- ---- ---- Paper Manufacturing 92.5% 86.3% 89.7% 84.0% Specialty Manufacturing 83.5% 85.0% 85.6% 84.0% Wireless Communications Equipment 78.1% 72.7% 76.4% 73.2%
8 Material costs, primarily recycled paper fiber, have increased approximately 400% over the past year. Prices for paperboard have increased also but have generally lagged price increases in raw materials. Cost of electronic components have increased in the specialty manufacturing business. These increases have not been passed on fully to customers as of September 30, 1995. Costs increased in the wireless equipment manufacturing segment due to increased labor costs associated with the manufacture of certain products in the Bendix/King product line. These costs are expected to decrease as this product line is fully absorbed into this segment's facility. Selling, General and Administrative Expenses Selling, general and administrative expenses which consist primarily of commissions, marketing, salary and related costs, data processing and occupancy costs increased to 20.6% from 19.9% for the quarter ended September 30, 1995 from the quarter ended September 30, 1994, but decreased to 20.3% from 22.0% for the nine months ended September 30, 1995. Details of this change by segment follow:
Quarter Ended Nine Months Ended September 30, September 30, 1995 1994 1995 1994 ---- ---- ---- ---- Paper Manufacturing $ 677 $ 790 $ 2,229 $ 2,199 Specialty Manufacturing 547 502 1,529 1,518 Wireless Communications Equipment 2,167 2,650 7,482 8,747 Corporate 482 233 1,349 1,382
The decrease in selling, general and administrative expenses were in the wireless communications equipment segment. This was related to the reduction in personnel in 1994 and the first half of 1995. RELM Communications the Company's wireless communications equipment subsidiary, purchased the Bendix/King Mobile Communications Division from AlliedSignal in September, 1993. Interest Expense Interest Expense decreased from $239 for the quarter ended September 30, 1994 to $230 for the quarter ended September 30, 1995 and increased from $537 for the nine months ended September 30, 1994 to $640 for the nine months ended September 30, 1995. The increase for the nine months ended September 1995 was due to increased debt levels. Investment Income Investment income for the nine months ended September 30, 1995 was due to the settlement of a class action suit for a security previous owned by the Company. 9 Income Taxes Income taxes (benefit) represented a 34.0% effective tax rate for the quarter ended September 30, 1995. This rate is made up of a 34% federal tax rate and varying state tax rates. The effective tax rate for 1994 was 37.6%. The effective tax rate for the quarter ended September 30, 1994 was 36.0%. Inflation and Changing Prices Inflation and changing prices for the nine months ended September 30, 1995 and the nine months ended September 30, 1994 have contributed to increases in wages, facility and raw material costs. The Company believes that it will be able to pass on most of its future inflationary increases to its customers. The wireless equipment manufacturing segment is also subject to changing foreign currency exchange rates in its purchases of raw materials. The Company employs several methods to protect against increases in costs due to currency fluctuations. It is not always possible to pass on the effects of currency fluctuations to customers. However, competition in these markets are subject to similar fluctuations in product cost. Liquidity and Capital Resources Working capital decreased by $3,250,000 during the nine months ended September 30, 1995. This decrease is due to the sale of the Company's steel processing facility during the third quarter of 1995. The Company has credit available under its existing lines of credit in excess of $2,000,000. Capital expenditures for the nine months of 1995 were $588,000 which was paid from operating cash flow and bank credit lines. Capital expenditures for 1995 for the combined entity are not expected to exceed $1.5 million. Management expects that capital expenditures will be funded through operating cash flow and financing sources available to the Company. Based on the anticipated replacement needs, and expected purchases of equipment for additional capacity, management expects that capital expenditures will continue at these levels for the foreseeable future. Inventories decreased $5,459,000 for the nine months ended September 30, 1995. This decrease is due to the sale of the Company's steel processing subsidiary. 10 Discontinued Operations In February, 1995 the Company decided to discontinue and dispose of its real estate development and management segment. Real estate inventories were written down to their estimated orderly liquidation value as of December 31, 1994. On May 23, 1995 the Board of Directors decided to accept an offer to purchase the stock of Niagara Cold Drawn Corporation for approximately $6.8 million. The sale was completed on August 6, 1995. Management will consider disposal of subsidiaries that do not earn an adequate return or fit the long-term goals of the Company. 11 ITEM 6. Exhibits and Reports of Form 8-K b.) Reports on Form 8-K The Registrant was not required to file reports on Form 8K during the quarter ended September 30, 1995. 12 Pursuant to the requirements of securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ADAGE, INC. \s\Robert T. Holland ------------------------------------- Robert T. Holland Vice President - Finance Date: November 14, 1994 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1994 AND THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 0 0 10,895 0 21,760 35,168 13,179 0 57,658 13,904 0 3,073 0 0 29,637 57,658 62,130 62,662 50,952 0 0 0 640 (1,563) (531) (1,032) 2,423 0 0 (1,391) $(.28) $(.28)
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